Software Connect is a consultancy that offers advice on business software. They recently surveyed WMS buyers over the past two years to see what warehouse management software systems they were buying, and why. Their conclusions were compiled into a report you can find here but we’ll summarize a few highlights here today, since we have helped folks implement WMS systems for many years and found their advice and comments timely. For their report, they summarized 116 conversations with buyers. The common denominator among these WMS system purchasers is that they all have “high order velocity and want to optimize their inventory movement” (and who doesn’t?)

Their key findings…

Fully 75% want barcoding, “still far and away the most used scanning tech in warehouses.” By contrast, just 7% were looking into RFID.

Budgets for WMS have gone up – as the ROI value over time has been proven, no doubt. In companies of 100 employees, systems are selling for around $300,000. In companies of 20 to 100 employees, the costs run from about $100 to $150K.

Over 50% of buyers are managing multiple warehouses.

About half of buyers want standalone WMS, while the other half are looking for a full ERP + WMS system.

One-third of those surveyed wanted new software because they needed “more or better features,” (presumably over what they currently have), and 20% are looking to replace an older system.

70% of buyers surveyed were tracking 10,000 or fewer SKUs. Over half of all respondents tracked between 1,000 and 10,000.

About 25% of WMS buyers manage customer-owned inventory, and thus have 3PL requirements, which often include things like unique labeling systems and of course the ability to track by multiple client-inventory-owners.

Buyers are using new WMS systems to replace a wide range of systems, but the most commonly cited were QuickBooks Enterprise, QuickBooks and Sage 300 (formerly Sage ACCPAC).

Software Connect’s wrap-up sums up their conclusions this way:

“A WMS must be able to process all the steps necessary to complete an order. Often buyers demand software integration with other ERP, distribution, and supply-chain systems. All to better connect their warehouse, enterprise, and partner relations.”

Our friends at Insight Works, a provider of automated warehouse and software solutions, have pointed out the most common ways companies lose money through warehouse and inventory mistakes. Considering that these mistakes are common, and that the U.S. Bureau of Labor Statistics says that the number of U.S. warehouses has risen 15% since 2010, they are worth sharing.

Overstocking. It’s an expensive issue for all supply chain operations. Statistics show that U.S. companies are sitting on $1.43 of inventory for every $1 in sales – and that’s too much. Errors that range from incorrect bin labeling and putaway procedures, to lack of oversight or pure laziness are all contributors. But the bottom line is a considerable amount of tied-up working capital which, if recaptured, represents a sizeable bump in the bottom line.

That’s where automation helps, and often, very quickly once implemented. A warehouse management system can automate stocking processes and ensure accuracy in stock counts, while also supporting managers with insights into optimal time to restock.

Mispicks-and Mis-shipments. A single mis-pick costs, on average, about $22, and the average U.S. company has been shown to lose $390,000 annually due to mis-picks (yes, this obviously includes some pretty large firms, but not exclusively).

Here again, automation pays. A robust warehouse management system can pinpoint and address inefficiencies. Barcode scanners help reduce the chances of mispicks and mis-shipments by eliminating risks associated with manual data entry. Any picking errors are identified instantly by the barcode scanner, and incorrect items never make it to shipping, let alone customers.

As the folks at Insights Works note… While inventory counts are undertaken to help support accurate inventory records, manual counts are time-consuming and prone to error. A worker may, for example, accidentally group differently sized items together and count them as the same size, resulting in an incorrect count. Replacing these manual processes with an automated system that leverages barcode scanners can reduce time spent on cycle and inventory counts and cut down on errors. Best of all, when items are scanned and counted, data is automatically added to the inventory management system, further reducing administrative tasks and supporting accuracy without extra work.

Picking time. Today’s WMS systems can direct workers on the most efficient routes to make their picks when filling orders. Some can even provide optimal picking order based on certain order characteristics. Workers save time, increase pick rates, and substantially reduce picking errors compared to manual systems. This helps make even new, less experienced workers more efficient in short order.

Incoming inventory errors. Some warehouses still use time-consuming and error-prone manual processes for counting and reconciling incoming shipments, which delay outgoing orders awaiting updated inventory data. Instead, workers can leverage barcode scanning to more quickly receive and verify incoming shipments because scanned data is automatically sent to the warehouse management system — no extra steps needed. This supports speed and accuracy, and ensures that human errors related to incoming inventory are avoided.

The bottom line is this: Automated warehouse management systems have been around for years, and they greatly improve the efficiencies of all warehouse operations. In fact, probably no other ERP automation component provides a faster payback. If you’re not already fully automated ‘out back,’ perhaps it’s time you asked yourself why.

A recent post by Brian Neufeld of Insight Works, a manufacturing and warehouse management supplier of software add-ins for Microsoft Dynamics points out a few of the key areas where companies lose money due to inaccurate inventory – points we think worth passing along today.

One key area of waste involves, of course, the tying up of working capital. Inaccurate counts create situations where purchasers buy more inventory than they need, tying up precious capital. How often is it the case that misplaced inventory, or double-locations, cause confusion and increased costs? Having 100 of something when you only need 50 is simply wasteful – but unless you know just how many you have of an item, and its precise location, it’s a mistake that’s all too easy to make.

Multiplied across enough items, in the end you’re reducing the amount of capital available for more important uses, basically a lost opportunity cost.

And then there’s inventory shrink. According to the National Retail Federation, 1.44% of all sales are lost to inventory shrink. Shrink does not only refer to theft and damage, but can also be a byproduct of bad counts and other tracking inaccuracies.

And then there are labor costs. A lot of time gets lost chasing down items that aren’t there… or aren’t where a system says they are. That lost time is compounded when others have to join the search. And it doesn’t have to happen all the time to add up to a fair amount of lost labor efficiency chasing product.

Then there’s the cost of lost customers due to the inability to fulfill customer orders or meet their time demands, often caused by out-of-stock situations.

All these issues and more can be turned around by embracing the benefits of warehouse and inventory automation. Paper-based systems are error-prone, labor-intensive and time-consuming. Today’s digital solutions, consisting of software integrated with the company’s inventory, production and sales orders, and coupled with commonly available handheld bar code scanners, can make these mistakes and costly issues a thing of the past.

An article from Ziff-Davis titled Big Data, Mobility, and Green IT: Innovations for Manufacturers and Distributors makes a couple good points about the value of extending your ERP system into the warehouse to create more accurate and real-time data throughout the supply chain.

In a typical warehouse we often find that most employees perform their tasks away from computer terminals. Often, they use written instructions of data initially transcribed on paper, more often than not at the end of a day, to input data into the system. This creates some obvious, often costly inefficiencies, like user errors and double-entry of data. But more importantly, it can lead to decisions being made by other users that are already stale, decisions that might have been different on the purchasing and production side if current data had been available.

Today’s newer mobility technologies introduce opportunities to improve the tracking and collection of real-time, accurate data throughout the supply chain. For example, a receiving clerk can complete an ERP-integrated inspection form during actual inspection, triggering a real-time update of relevant inventory processes and records.

But mobility can have an even more subtle effect: it can help companies protect their margins through more effective costing procedures. As Jonathan Gross of Pemeco Consulting points out, “Many manufacturers and distributors determine product pricing by applying a margin to the sum of a standard labor cost and inventory costs. The problem, of course, is that standard labor costs seldom reflect the actual value of work effort. As a result, actual margins seldom reflect intended margins. Mobile labor tracking technologies allow businesses to capture actual labor costs and improve margins.”

As well, mobile technologies can improve overall warehouse and materials management processes. As we’ve often pointed out in the past, barcoding and RFID technologies help greatly when it comes to minimizing warehouse errors, improving order fill rates, speeding up delivery, and improving overall picking, packing and put-away. The fact that mobile units (handhelds, or more recently, tablets like an iPad or similar device) can be used to track inventory movements allows inventory to become “real-time.” This results in better integration of the warehouse into the overall operation, and improves its visibility within the ERP system. This kind of feedback can even have a downstream effect on JIT (just in time) improvements as well as planning, purchasing and scheduling activities.

All in all, any company with a warehouse should be investigating what today’s newer ERP systems have to offer in terms of mobile functionality. It’s a hot area, and for good reason: it saves companies time, mistakes and money.

Third-party Logistics providers (or 3PLs) have special warehouse management needs, above and beyond those of, say, the manufacturer that distributes its own products, as pointed out recently in a white paper by WMS publisher Accellos. That’s worth remembering, the article states, when a third party logistics provider that’s looking for warehouse management software hears it biggest customer suggest they simply use what the they’re using. Accellos’ conclusion: a 3PL’s special needs warrant looking at a product designed specifically for their logistics niche. As a result, they highlighted FiveBusiness Drivers a 3PL should consider when evaluating warehouse management systems for their own purposes…

Inventory Integrity – To a 3PL nothing is more important than properly assigning, tracking and managing their clients’ respective inventories. It’s even more daunting when multiple clients’ inventory share the same building. The ability to concatenate (or ‘join’) overlapping identifiers such as item codes or pallet codes with a client ID to provide a truly unique identifier should be considered.

Customer Service Enablement – A system built for the multi-client environment of a 3PL must ensure client access to their information only. So in addition to providing real-time information on inventory, you can provide individualized client self-service features too, like custom alerts or exception reporting.

Concurrent Client Logistics – This means being able to manage multiple clients within a single building, utilizing shared resources while maintaining inventory integrity and data security for each 3PL client’s workflow.

Revenue Assurance – Tracking revenue producing activities from client to client, with different standards and actions, can be complex. Clients often want to be billed in different ways for differing actions or rules. A system dedicated to the needs of a 3PL can handle these requirements by tracking the right revenue producing actions, client by client.

Beyond the Four Walls – Items outside the building should also be taken into account, like transportation and supplier management. If you overpay to move goods in and out of the facility, your internal cost efficiencies can be compromised. Improvement requires the management of routing rules for multiple clients that may not be included in a standard WMS package.

The takeaway for 3PLs is the need for a careful needs analysis, taking into account all the factors that make your distribution center and policies unique. One size does not fit all, would seem to be Accellos’ overarching point, and a “purpose-built” WMS may be the better solution for the full-service 3PL.

APICS Magazine recently published an article titled “A Failure to Communicate” by Ron Crabtree, an author of five books on operational excellence. In it, Crabtree points out a variety of both leading and trailing indicators that, when analyzed correctly and acted upon, can yield considerable improvements in a company’s fulfillment performance out of the warehouse. The points and conclusions we’ve drawn from his article are worth sharing… and will, we believe, be of value to anyone seeking to improve warehouse performance.

In the article, the author breaks down a variety of common performance metrics used in warehousing and distribution operations. Most warehouse performance indicators tend to be of the “trailing” nature. That is, they reflect, usually from a financial performance perspective, what has already happened in the warehouse. Trailing indicators include:

Hours worked (and hours worked per unit)

Invoice lines shipped per hour

Parts and Labor cost per line

But what if you could use your trailing (or financial) indicators as a springboard to improving warehouse performance by analyzing key “leading” indicators? These would be the data you need to improve future performance.

Crabtree relates the experience of a retail-level consumer goods fulfillment center that was using cost per line shipped and percentage of returns as its key metrics of financial success. But returns were unacceptably high, and a quick analysis determined this was the result of the wrong items being shipped in the first place. This resulted in still greater costs being incurred because the company was performing a 100% audit on outbound containers to seek out the problem’s source.

Crabtree’s consultants decided to examine the underlying causes, which turned out to revolve around issues with the handheld units and location labeling. It turned out that the warehouse was handling 25,000 different items, about double what it was sized to do. As a result, goods were crammed into every nook and cranny. Partly due to the excess in items stocked, bar code labeling had deteriorated over time, and upon review it was determined that handhelds were failing far too often. The combination was stressing the system to the point of having financial (i.e., “trailing indicator”) impact on the company.

But by looking at the more “leading” indicators (such as handheld reliability, location accuracy, and quantity on hand accuracy), the team could find the root causes and begin to identify solutions. In this case, those turned out to include creating baseline measurements for scanners by utilizing some trusted quality measures — taught by APICS — including TPM (total productive maintenance) and OEE (overall equipment effectiveness) principles.

By instituting rolling audits of unreadable locations, and a maintenance strategy based on a well-known quality and lean tool known as the Five Ss, the company brought their warehouse issues under control, resulting in a 20% reduction in cost per order line (a financial, or “trailing” indicator) and a 75% drop in wrong items shipped – needless to say, a huge money saver overall.

By utilizing these TPM and OEE indicators, “a meaningful set of metrics that directly attached the root causes for bad picking” was created, notes Crabtree. This in turn improved workforce morale and accountability, and as the metrics went down, it served as an early warning that cost and accuracy issues were looming.

Hence, by identifying and acting upon the key “leading” indicators, the financial (“trailing”) indicators were brought into line, to the improvement of not just the warehouse’s lot, but the company’s financials as a whole.

Directed putaway in a warehouse refers to the placement of items into storage locations based on direction, or ‘rules’, offered by warehouse management software. Shelf locations can be advantageously directed this way to improve warehouse efficiency and labor savings in areas like shipment throughput velocity, returns processing or warranty repair.

By using business rules (or a warehouse management system that is ‘modifiable’), directed putaway can eliminate much of the guesswork on the part of a warehouse staffer, and shorten the time it takes to get new staff up to speed in the warehouse, since they don’t have to learn complicated location putaway schemes. The system can direct putaway to bins optimally located for, say, a kitting process required before final shipping – requiring that like items be grouped together for example.

One corollary to directed putaway that we’ve found useful (we utilize this in our own WMS package, called E-Z WMS) is a form of bin reservation, whereby a user stocking shelves is directed via a handheld device that only product “X” can be placed in bin “123”. This can be especially useful in environments that store small but expensive components, or where precise location is important for other company-determined reasons.

Sometimes, the packaging and storing requirements for a product will determine a directed putaway. Other times, special handling requirements (e.g., refrigeration) can determine storage locations. In lumber, putaway can be determined by species, lengths, assembly sequence or other common criteria – with the software either directing, or providing guidance to, the warehouse worker.

In the end, such models can create greater warehouse efficiencies, provide better use of critical warehouse space, create a more optimal order-filling process, and better support “mixes” of order types or special handling needs.

Using product putaway rules can often take what was a complex manual process and begin inserting some computer based logic into the system, based on your unique product, category or packaging requirements. With primary and secondary rules, you can begin to build into your WMS a level of intelligence that lets your whole floor team do more with less – less labor, fewer steps, lower costs. Best of all, since rules are often made to be broken, you can determine which rules to follow and when, and then build these contingencies into your system over time – provided that system is highly rules based, or allows for future modifications.

The facility for some form of directed putaway (or modification to allow it) is yet another key consideration in the management of today’s warehouse, and in the selection of the best warehouse management system for your firm’s unique requirements.